Constellation causes consternation

Following a review, Constellation Brands, the world’s largest wine company, will undertake a massive AUD 154 million (EUR 89 million) restructure of its Australian operations. Of concern is news that Constellation Australia will sell about half its vineyards in the country and reduce production sites from ten to seven. The number of products, especially the cheaper priced ones, will also be cut to increase efficiency and reduce debt.

The changes announced in August 2008 will leave Constellation with about 1,000 ha of vineyards, seven wineries and 1,200 employees in Australia. Hopefully, many of the estimated 350 employees affected by closures and sales will be retained by the new owners.

Private equity companies, rather than listed entities such as Foster’s and Lion Nathan, are thought to be more likely to acquire the wineries Constellation Australia put up for sale. However, only one company - Kirrihill Wines (SA) - has declared a public interest in bidding. Constellation hopes to sell the three wineries - Leasingham (Clare Valley), Stonehaven (Padthaway SA) and Goundrey (Mt Barker WA) - by June next year.

That news follows hot on the heels of another alarming revelation that the trouble has deepened for the Australian wine industry with exports continuing to slip. Volumes have crashed from 806 million litres for year to July 2007 to 704 million for this year. The Unites States was the main source of the decline with sales down by 25 percent in value and UK sales down by 9 percent. However, a significant move away from these traditional markets is being countered by rapid growth in sales in China, Denmark, Hong Kong, Netherlands and Singapore.